Study researches high costs of medications, offers solutions

The Journal of the American Medical Association recently published a study titled “The High Cost of Prescription Drugs in the United States,” dissecting the phenomena behind the skewed prices of many U.S. drugs. In light of Mylan Inc.’s recent spike in epinephrine drug prices and Turing Pharmaceuticals’s price increase in 105 drugs, namely Daraprim, many concerns arise as to why the United States is one of the only industrialized countries that faces this recurring issue.

Unlike in the United States, many industrialized countries, such as England and Wales, have socialized health care. Nations with nationalized health care usually do not encounter unexpected spikes in drug prices because their government is in charge of approving and regulating prices set by drug manufacturers.

Generally, if a price is deemed to be unaffordable in context to its necessity and the average affordability of its intended patients, it is rejected and it is up to drug manufacturers to lower the prices in order for their drugs to be circulated and sold.

In the United States, however, the government allows drug manufacturers the right to patent their drugs for up to 20 years. Although the Food and Drug Administration may require up to eight years of testing in order for the drug to be approved, companies are usually granted patent protection in the meantime. The patent not only protects their right to set any price they would like, but it may also grant them the ability to establish a monopoly.

While monopolies are common in this industry, there are still instances where several companies have patented similar drugs and have still maintained high prices while in competition. The study notes that this is usually not the case when the patent protection is nearing its expiration and the company is still in competition.

According to the study, “brand-name drugs comprise only 10 percent of all dispensed prescriptions in the United States, [but] they account for 72 percent of drug spending. Between 2008 and 2015, prices for the most commonly used brand-name drugs increased 164 percent.”

As grounds on which a drug can be patented can be endless, name-brand drug companies can maintain monopolies by patenting very specific and essential characteristics of a drug, ultimately delaying or altogether preventing generic name drugs from entering the
market.

In the case of Turing Pharmaceuticals’s drug Daraprim, one of the only reasons a generic name drug was able to enter the market afterward was because Daraprim did not have a patent, although at the time no other company had been licensed to sell the drug.

Drug companies currently justify higher prices by citing the costs that were needed for its research and development, arguing that lowering drug prices could keep the company from creating new and better drugs in the future. There has, however, been no consensus on the average cost of bringing a new drug into the market. The study also argues that most drug companies receive funding and investments from public sources and also continue research from other academic institutions.

The result of U.S. drug market policies has had a deeply negative impact not only on patients, but on any entity involved in the selling, prescribing and buying of these drugs.

As there is no seamless flow in communication between doctors, pharmacists and health insurance companies, doctors may prescribe name-brand drugs, as opposed to available generic-brand drugs, and it may have a bigger financial impact on patients in the form of higher deductibles and copayments. This may deter patients from properly following medication procedures because of affordability and, ultimately, contribute to poorer health in these people. This can be even worse for many of the 29 million Americans who are currently uninsured.

The result of patients being unable to pay higher costs may also leave insurance companies the option to offer reimbursement coupons for their patients.

Although this may bode well for patients, it would hurt insurance companies who would then require greater spending on healthcare instead of pharmaceuticals. It may also lead companies to divert financial allocations from one service to another.